SPX Spread Execution at even proces

Hello Folks,

I try to trade SPX credit spreads on ThinkorSwim platforms at or close to even and it never fills. I have captured a few screen shots now to show that the mark price is higher than my limit price and orer is still sitting in the queue ad eventually never fills. This however does not happen if I use the "paper money" account so do not reply if you have not used real money in trading these.

Has anyone experienced this issue with TOS ? Do you have any recommendation ?

Thanks in advance,

SP

 

This is a typical issue with the SPX. I have traded thousands of these options and I have a couple of recommendations re your trade.

1) Since the SPX is currently still traded on the floor and only at the CBOE, you are partly at the mercy of the market maker. Such narrow spreads will be difficult to exit easily. Remember, you will need to trade with the locals to exit (since these options are fairly close to the money, one of them will likely be near or in the money at expiry). Go with a wider spread further away from the money, and you may be able to avoid at least one trade.


2) Second, ask yourself what is the maximum value of this trade. Then check the quotes and see if you are offering anything the market maker would be likely to be interested in. I have been filled at or very close to the mid many times when the price is reasonable for both sides. I have even been filled at better than the mid on condors!

3) Despite the volume at SPX, a 50 lot is still a fairly large fill. Sometimes breaking the order into littler pieces makes it go much faster and at better prices. There have been many times when I have broken a 50 lot into smaller pieces and had it filled far more easily. This takes more time of course, and is a little more expensive (depending on your commission structure).

Happy trading

 

Thanks for the insights John.

Can you also comment on your experience with XSP ? Its not pit traded and may remove Market maker bias. Also from your comments I feel XSP may be an easier to ride vehicle.

SP

 

Your observation is not limited to SPX and I had similar concerns when I began trading spreads. I had a conversation with ToS about this and here is what I learned.

1. The Mark price is a synthetic calculation based on the Mark price of each of the legs.
2. There may be a quoted Mark price for each leg, but insufficient offers on the other side to fill the complete trade.
3. The Mark price is seldom what you will trade at in real money. You will need to look in the order entry frame and see the representation below that shows a mini graph starting with Nat and ending with Mid. You will notice the Mark is at the Mid end. The Nat end is where you are guaranteed in getting a fill. Mid price seldom fills quickly, if at all.
4. ToS does partial fills, so breaking up my orders had no effect. Large orders have remained only partially filled (because of availability on the other side) sufficiently long for the market to move to where my offer would not be filled and I had to decide to cancel or adjust my price.

Additionally, I prefer the credit spread as my trading unit rather than the IC. It makes management easier and sometimes the companion credit spread does not offer sufficient return for the risk so may remain unopened for days until my criteria are met.

 

Sorry, I can't comment on the XSP. I've never traded it.

I also trade the NDX, and the fills are somewhat better than the SPX. I like the fact that both indexes are traded in 5 point intervals on a big index. This gives marvelous flexibility to adjust as desired. I also prefer the European options for the lack of hassles with exercise and assignment. I don't mind cash settlement at all, although the SET/ NDS process is somewhat annoying to say the least.

I have to admit that I just concentrate on these two indexes and on no others. I have a full time job, and this is a profitable sideline at this time.

Howard's comment about the mark is true. It is synthetically generated by ToS software. It rarely exists in real life. Usually a vertical spread can be filled for 0.10 or 0.15 off the mark in real life on the SPX. Fills are better close to the money where more active trading occurs. I usually start offering at the mid and adjust a little at a time until it fills. If the price would be unacceptable, and I am opening, I just let it hang at my price to see if there are nibbles.

IC's are harder to fill than regular verticals and the spreads are wider.

Despite Howard's comment about partial fills, my comment about 5 lot condors still stands. I've tried 10 or 20 with no action for minutes, then reduced to 5 ( with no change in price) and had them snapped up in seconds many times.